Chipotle lowers sales forecast as tariff uncertainty curbs dining out

By Juveria Tabassum

April 23 (Reuters) - Chipotle Mexican Grill CMG.N tempered its annual comparable sales growth forecast on Wednesday as the Trump administration's tariffs raise supply chain costs and fan economic uncertainty, prompting Americans to spend less on dining out.

President Donald Trump's sweeping tariffs on several countries and an escalating trade war with China have fueled fears of a recession in the U.S. and forced companies to pull back their annual expectations as consumers deal with higher costs of living.

"In February, we began to see that elevated level of uncertainty felt by consumers. Consumers were saving money because of concerns around the economy, and reducing restaurant visits. These trends continued into April," CEO Scott Boatwright said on a post-earnings call.

Chipotle's comparable restaurant sales fell for the first time in more than four years to 0.4% in the quarter ended March 31.

Trump's newly enacted tariffs, including those on aluminum, as well as broad-based 10% levies will impact Chipotle's cost of sales by about 50 basis points, company executives said.

According to a note by TD Cowen analysts, Chipotle imports beef from Australia, which faces a 10% tariff, and paper and packaging material from China, which faces a 145% duty. The company also imports some tomatoes from Mexico, which was hit by a 21% tariff last week.

Chipotle now expects annual comparable sales growth in the low single-digit range, compared with a prior forecast for a low- to mid-single-digit rise.

The company has also leaned into menu innovation and invested in technology such as produce slicers and three-tiered rice cookers to boost efficiency and soften the hit from higher input costs.

Restaurant-level operating margin fell to 26.2% in the first quarter, compared with 27.5% a year ago.

"It's a growth story in the consumer discretionary space – specifically, restaurants – as we do see not a lot of strong growers in there. (This is a) crack in the armor," said Don Nesbitt, senior PM at F/m Investments, which holds Chipotle shares.

The company's shares were down about 2% in extended trading after its total revenue of $2.88 billion fell short of estimates of $2.95 billion, according to data compiled by LSEG.

Its adjusted earnings per share of 29 cents beat estimates by 1 cent.